USD: Economic outlook remains murky
Disappointment for the dollar on Monday morning isn’t setting a cheerful tone for the rest of the week. Investors were expecting durable goods orders to recover in May, but no such luck was had. Durable goods orders are an important indicator of investment confidence and should not be discounted. Read more about it in our daily update, the not-so durable dollar.
Ahead, we have a fair number of Federal Reserve officials to watch. Tuesday, Fed Chair Janet Yellen will be delivering a speech in London. Three other policymakers will make statements on Tuesday, including Philly Fed President Harker, Minneapolis Fed’s Kashkari, and John Williams of the San Francisco Fed, who will speak again on Wednesday. James Bullard will speak on monetary policy Thursday.
We’re keeping a close eye on GDP growth on Thursday. The first quarter annualized reading is expected to match the previous quarter at a 1.2% growth rate. We also have PCE inflation for Q1 which is expected to confirm a slight decline.
PCE is the Fed’s preferred measure of inflation, and with a weaker Q1 already pushed to the periphery, we are closely watching the monthly reading for May. The inflation outlook is central to the Fed’s direction on monetary policy. Investors are expecting a slight drop in PCE inflation from the previous month.
EUR: Inflation continues to inform the ECB’s outlook
Business sentiment is soaring in Germany. The IFO business climate survey hit a record 115.1 in June, and has been steadily expanding since January.
Among the many policymakers from the ECB speaking this week, we are watching President Mario Draghi who will deliver an opening statement at the ECB Forum Tuesday. He will also participate on a panel discussion Wednesday.
Thursday, a final reading of consumer confidence in June should confirm a steady improvement since February.
To finish the week off, Friday we will see the release of a flash estimate for Eurozone CPI inflation. Energy prices have been driving headline figures higher, but these are changeable and may not accurately reflect core trends. Indeed, underlying inflation pressures have been lackluster at best. This is one of the major arguments in keeping accommodative policy at the ECD. Inflation is one of the must-watch indicators for insight on the ECB’s outlook. German retail sales and unemployment are also being eyed.
GBP: Steady as she goes
The Financial Stability Report is a bi-annual publication from the Bank of England. It shows the Financial Policy Committee’s assessment of the financial sector – in particular its stability and resilience. Governor Carney will speak at the press conference to follow. We’re watching for mentions of Brexit and how the uncertainties ahead could weigh on London’s financial services firms.
Governor Carney will speak again at a panel on monetary policy alongside his colleagues heading the ECB, Bank of Japan, and Bank of Canada.
Friday it’s back to the data grind. We’re looking for GDP growth to confirm a dismal 0.2% expansion in the first quarter.
AUD: Will manufacturing recover in June?
In a week flooded with central bank speak, Reserve Bank of Australia Deputy Governor Debelle is the only policymaker from the RBA scheduled this week.
New home sales for the month of May are due Wednesday. Friday we are looking at June’s manufacturing PMI figures. The AIG Manufacturing PMI index eased in May as all seven sub-indexes expanded at a slower rate from the month before.
CAD: Just keep swimming
Another central bank watch for Canada. BoC Governor Stephen Poloz is one of four central bank heads speaking on a policy panel at the ECB Forum on Wednesday. He will be followed by Deputy Governor Lynn Patterson later that day.
Friday we have GDP growth figures for April. Analysts are expecting a slightly slower pace of expansion compared to a month before. The Canadian economy beat expectations in March, growing at 0.5% after a negative print in February.
The Bank of Canada will also release their Business Outlook Survey on Friday. The Spring outlook had been quite positive, showing stronger domestic demand after subdued activity over the past two years. This speaks to an increasingly positive outlook for the Canadian economy, and if we see similar language this would fuel the argument for a more hawkish BoC.
JPY: Busy week for the BoJ
Bank of Japan Governor Haruhiko Kuroda will be joining his counterparts at the European Central Bank, Bank of Canada, and Bank of England in a panel discussion on Wednesday. They will discuss monetary policy at the ECB Forum, a summit similar to Jackson Hole held in the US.
We have a heavy week for data out of the island nation. Wednesday’s retail sales are expected to show a slight decline in May. Inflation figures Thursday are also expected to temper gains, while unemployment is estimated to remain unchanged in the month of May.
Analysts are looking for initial industrial production figures to fall after April saw the fastest rise in industrial output since June 2011.